NPC to Amend Civil Law

According to an announcement on the official website of the National People’s Congress (“NPC”) on 28 June 2016, the NPC conducted its first reading of the General Principles of the Civil Law of the People’s Republic of China (Draft Version) 2016 during the 21st meeting of the 12th session of the NPC Standing Committee in Beijing. The draft contains a number of proposed changes intended to address the changing needs of China’s rapidly developing society.

These changes include:

  • providing civil capacity to protect the property and personal rights of a foetus, provided the foetus survives the pregnancy (Art. 16);
  • lowering the age for the limited civil capacity of minors from 10 years old to six years old (Art. 19);
  • increasing the maintenance obligations of adults to their parents with no or limited capacity for civil conduct (Art. 25);
  • strengthening the protection for adults who are unable to fully account for their own conduct (Art. 21);
  • removing employers from the scope of guardians and expanding the scope to cover other organisations (including charity organisations), subject to the consent of the local government department in charge (Art. 27);
  • improving the system for the removal of a guardian (Art. 34);
  • clarifying the issue of civil capacity of non-legal person organisations (including sole proprietorships and partnerships) (Art. 91);
  • providing increased protection for virtual property rights, including information networks and data privacy (Art. 108);
  • adding a new form of civil liability for environmental restoration (Art. 160); and
  • increasing the statute of limitations from two years to three years (Art.167).

Market Reaction

Thomas Y. Man, Professor, Peking University School of Transnational Law, Shenzhen

“The issuance of the draft signifies the beginning of the end of China’s long march for a comprehensive civil code that began in the 1980s. The draft introduces sweeping, yet incremental changes to the current civil law principles (promulgated in 1986 as a stand-alone piece of legislation). Once adopted, it will serve as the introductory chapter of the contemplated civil code setting out the fundamental principles. The NPC intends to complete this process by 2020, culminating with the adoption of the civil code. There will be intense legislative activities over the next few years when separate chapters covering different areas of civil law are to be drafted, debated and adopted by the NPC.”

Action Items

While the final version of the amended civil law is years away, General Counsel may wish to take note of the following proposed changes:

  • the classification of all legal persons into for-profit and not-for-profit organisations indicates increased legislative attention to not-for-profit organisations;
  • the clarification that non-legal person organisations (such as sole proprietorships, partnerships and branches) enjoy civil capacity signifies the growing importance of non-legal person organisations;
  • the recognition of hidden-name agent, in addition to the existing delineation of explicit and apparent agency relationships, captures the growing complexity of principal-agency relations in commercial activities; and
  • the extension of the statute of limitations from two years to three years will have a sweeping impact on market participants’ psychology of legal exposure in business activities with the potential to give rise to increased use of injunctions to toll the running of the applicable statute of limitations in a given legal action.